November 8, 2017

Nicholas Financial Reports 2nd Quarter Results

Clearwater, Florida, - Nicholas Financial, Inc. (NASDAQ: NICK) announced that for the three months ended September 30, 2017, diluted earnings per share decreased 84% to $0.04 as compared to $0.25 for the three months ended September 30, 2016. Net earnings were $0.3 million and $2.0 million for the three months ended September 30, 2017 and 2016, respectively. Revenue decreased 6% to $21.3 million for the three months ended September 30, 2017 as compared to $22.6 million for the three months ended September 30, 2016.

For the six months ended September 30, 2017, per share diluted net earnings decreased 76% to $0.15 as compared to $0.62 for the six months ended September 30, 2016. Net earnings were $1.2 million and $4.9 million for the six months ended September 30, 2017 and 2016, respectively. Revenue decreased 5% to $43.5 million for the six months ended September 30, 2017 as compared to $45.6 million for the six months ended September 30, 2016.

Our net earnings for the three and six months ended September 30, 2017 were adversely affected primarily by an increase in the provision for credit losses due to higher charge-offs and past-due accounts along with a reduction in the gross portfolio yield.

In March 2017, the Company began modifying its underwriting guidelines, including the use of alternative credit data, to improve pricing for proper risk. This, along with the impact of Hurricane Irma, has led to a 35% reduction in Contracts acquired during the six months ended September 30, 2017 as compared to the six months ended September 30, 2016.

Nicholas Financial, Inc. is one of the largest publicly-traded specialty consumer finance companies in North America. The Company operates branch locations in both Southeastern and Midwestern U.S. states. The Company has approximately 7,883,000 shares of voting common stock outstanding. For an index of Nicholas Financial, Inc.’s news releases or to obtain a specific release, visit our web site at www.nicholasfinancial.com.

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that involve risks and uncertainties including general economic conditions, access to bank financing, and other risks detailed from time to time in the Company’s filings and reports with the Securities and Exchange Commission including the Company’s Annual Report on Form 10-K for the year ended March 31, 2017. Such statements are based on the beliefs of Company management as well as assumptions made by and information currently available to Company management. Actual events or results may differ materially. All forward-looking statements and cautionary statements included in this document are made as of the date hereby based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward looking statement or cautionary statement.

NICHOLAS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, Dollars in Thousands, Except Per Share Amounts)
         
 
Three months ended  
September 30,
Six months ended      
Septemember 30,    
  2017      2016      2017      2016     
Revenue:
  Interest and fee income on finance receivables $21,338  $22,647  $43,536  $45,562 
         
Expenses
  Operating 8,177  9,223  16,846  18,144 
  Provision for credit losses 10,146  8,144  19,898  15,170 
  Interest Expense 2,443  2,243  4,898  4,487 
  Change in fair value of interest rate swaps 8  (121) 17  (103)
  20,774  19,489  41,659  37,698 
 
Operating income before income taxes 564  3,158  1,877  7,864 
  Income tax expense 220  1,188  720  2,991 
    Net income $344  $1,970  $1,157  $4,873 
 
Earnings Per share:
    Basic $  0.04  $  0.25  $  0.15  $  0.63 
    Diluted $  0.04  $  0.25  $  0.15  $  0.62 
 

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Dollars in Thousands)
     
  September 30,
2017      		 March 31, 
2017     
Cash $   3,672  $   2,855 
Finance receivables, net 290,656  317,205 
Other assets 14,583  13,552 
     
  Total assets $308,911  $333,612 
     
Line of credit $188,000  $213,000 
Other Liabilities 10,426  11,752 
 
  Total Liabilities 198,726  224,752 
 
Shareholders' equity 110,485  108,860 
 
Total Liabilities and shareholders' equity $308,911   $333,612  
 

     
Portfolio Summary
Three months ended
September 30,
(In Thousands)

Six months ended
September 30,
(In Thousands)
  2017      2016      2017      2016     
Average finance receivables, net of unearned interest (1) $332,402  $343,542  $339,431  $343,327 
Average indebtedness (2) $195,883  $208,461  $203,145  $209,437 
Interest and fee income on finance receivables $  21,338  $  22,647  $  43,536  $  45,562 
Interest Expense 2,443  2,243  4,898 4,487
Net Interest and fee income on finance receivables $18,895  $20,404  $38,638  $41,075 
Gross portfolio yield (3) 25.68%  26.37%  25.65%  26.54% 
Interest expense as a percentage of average finance
   receivables, net of unearned interest 		2.94%  2.61%  2.89%  2.61% 
Provision for credit losses as a percentage of average
   finance receivables, net of unearned interest 		12.21%  9.48%  11.72%  8.84% 
Net portfolio yield (3) 10.53%  14.28%  11.04%  15.09% 
Marketing, salaries, employee benefits, depreciation and
  administrative expenses as a percentage of average
  finance receivables, net of unearned interest		 9.85%  10.60%  9.94%  10.51% 
Pre-tax yield as a percentage of average finance
  receivables, net of unearned interest (4)		 0.68%  3.68%  1.10%  4.58% 
Write-off to liquidation (5) 13.23%  11.41%  12.68%  10.42% 
Net charge-off percentage (6) 10.29%  9.36%  9.90%  8.43% 
Allowance percentage (7) 6.24%  3.99%  6.11%  3.99% 
 
Note:  All three-month and six-month statement of income performance indicators expressed as percentages have been annualized.
(1)     Average finance receivables, net of unearned interest, represents the average of gross finance receivables, less unearned
           interest throughout the period.
(2)     Average indebtedness represents the average outstanding borrowings under the Line.
(3)     Gross portfolio yield represents interest and fee income on finance receivables as a percentage of average finance
          receivables, net of unearned interest. Net portfolio yield represents (a) interest and fee income on finance receivables minus
           (b) interest expense minus (c) the provision for credit losses as a percentage of average finance receivables, net of unearned interest.
(4)     Pre-tax yield represents net portfolio yield minus administrative expenses (marketing, salaries, employee benefits, depreciation,
            and administrative), as a percentage of average finance receivables, net of unearned interest.
(5)     Write-off to liquidation percentage is defined as net charge-offs divided by liquidation. Liquidation is defined as beginning
           receivable balance plus current period purchases and originations minus ending receivable balance.
(6)     Net charge-off percentage represents net charge-offs (charge-offs less recoveries) divided by average finance receivables, net of
            unearned interest, outstanding during the period.
(7)     Allowance percentage represents the allowance for credit losses divided by average finance receivables, net of unearned interest,
            outstanding during the period.
 

The following tables present certain information regarding the delinquency rates experienced by the Company with respect to automobile finance installment contracts ("Contracts") and direct consumer loans ("Direct Loans") on a gross basis which includes unearned interest, excluding Chapter 13 bankrupt accounts:
 
  Delinquencies
Contracts  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days 90 + days Over 120 Total
September 30, 2017 $ 456,135 $ 27,260 $ 13,022 $ 7,501 $ 5,343 $ 53,126
    5.98% 2.85% 1.65% 1.17% 11.65%
   
September 30, 2016 $ 484,479 $ 29,327 $ 10,654 $ 5,249 $ 2,061 $ 47,291
    6.05% 2.20% 1.08% 0.43% 9.76%
Direct Loans  Gross Balance
Outstanding		 31 - 60 days 61 - 90 days 90 + days Over 120 Total
September 30, 2017 $ 10,566 $ 273 $ 59 $ 71 $ 146 $ 549
    2.59% 0.56% 0.67% 1.38% 5.20%
   
September 30, 2016 $ 11,088 $ 296 $ 87 $ 54 $ 17 $ 454
    2.67% 0.78% 0.49% 0.15% 4.09%
           

The following table presents selected information on Contracts purchased by the Company, net of unearned interest (1):
 
Three months ended      
September 30,          
Six months ended       
September 30,           
  2017      2016      2017      2016     
Purchases $25,782  $41,540  $52,943  $82,370 
Weighted APR 21.99%  22.26%  22.15%  22.32% 
Average Discount 7.27%  7.01%  7.41%  7.08% 
Weighted average term (months) 55  57  55  57 
Average Loan $   11,515  $   11,565  $   11,539  $   11,608 
Number of contracts 2,239  3,592  4,588  7,096 
 
 
The following table presents selected information on the entire Contract porfolio of the Company (1):
 
  As of      
September 30,          		            
  2017      2016                 
Weighted APR 22.28%  22.53%     
Weoghted average discount 7.32%  7.39%     
Weighted average term (months) 57  57     
Number of contracts 34,935  37,383     
 
(1) The following table does not include any selected information on Direct Loans; which only accounts for approximately 2% of the Company's
       total receivable portfolio.